Financial Planning

Budget

• A spending plan

• Set for a given period of time

• Prepared for a specific

amount of money

What is the difficulty in budgeting?

Self Control!

To begin a budget….

• You must have INCOME

money received from doing work.

• You must know your EXPENSES

things on which you must spend

your money.

Two Types of Expenses:

• FIXED – expenses that are repeated with the same amount each time they are paid.

Examples: rent, mortgage, car

payment, insurance

• VARIABLE – expenses that fluctuate in amount, each time they are paid.

Examples: Texas electricity bill,

water bill

So…..

To make a budget you would take your income minus your expenses.

INCOME – EXPENSES = BUDGET

BUT WAIT!!!!!!!!!!

• Your annual salary (GA) Gross Annual – is the amount you are contracted to earn

per year.

$24,000

• You must figure out how much that is

a month. This is number is called your

(GM) Gross Monthly

$24,000 / 12 = $2000

Uncle Sam gets his $$$ 1st

• This amount comes directly out of your paycheck. Your GM minus taxes (27%) is your

(NM) NET MONTHLYyour take-home pay

$2000 x 27% = $540 (taxes)

$2000 - $540 = $1460 NM

Start your monthly budget

$1460 (NM) – expenses

Expenses are given a % of NMHousing * Food * Transportation

Clothing * Saving * RecreationMedical * Personal

Other

Expenses

• Housing – (fixed) usually the largest percentage in a budget. Get room-mate(s) to split costs.

***Housing category CANNOT be more than 40% of salary***

• Food – (variable) decide how you like to eat…..steak or ramen? Do you eat a special diet? Could be as low a 8% for women.

• Clothing – (variable) do you wear a uniform to work? Or have to buy/wear suits? Wear out your shoes? Like to shop?

• Transportation – (fixed or variable) walk, ride bus, drive car, carpool?

Good advise….pay off your car if you can. *car payment

*insurance

*oil changes/ repairs/ state inspections

*gasoline

• Savings – (fixed) DO IT!!!

• Start early, stay consistent.

• Recreation – (variable) higher for singles.

Dating - wine & dine or blockbuster night? *fitness club

*weekend fun

*vacations

• Medical – (variable) regular prescriptions,

co-pay for sick visit to doctor, get-well meds.

• Personal – (variable) cosmetics, hair, nails, gifts, personal hygiene products. Pay yourself!!!

Figuring out the budget

If you know the money amount and need to find the percentage amount:

NM/$=%

$1460 (NM) / $475 (housing) = 32.5%(round up = 33%)

Ready

To

Make

Your

Own

Budget?